Real Estate Investing 101

by The Investor Today

I think I’ve taken every real estate investment course and seminar out there. They pretty much all promised me the knowledge and skills to “make me millions” but I’m just being honest when I say that reality proved to be more challenging than that for me. However, years later, I’ve managed to achieve success. Looking back, I could have saved myself a lot of time if I had a good starting guide.

I’d like to share with you the 10 most important hard earned lessons that I’ve learned along the way through trial and error.

Lesson #1 – Buy equity/Low payment

It’s just not very common to get significantly more than market value when reselling a property. The only way to make money in real estate is to purchase properties for cheaper than market value. You can either purchase for a cheap purchase price, a cheap monthly payment or a combination of both. You later sell that equity for a higher payment.

Lesson #2 – Motivated Sellers

You can only accomplish buying equity and/or a low payment by dealing with the right motivated sellers. You need to deal only with home owners who don’t want to sell their property but rather owners who must sell their property. Whenever a seller finishes telling you about their property, ask them why they are selling it to determine their level of motivation.

Lesson #3 – Fixable situation

It’s great that a lot of sellers can be motivated but their situation still has to be fixable. If the house is in tatters, you may not be able to fix it. If the seller is facing a pending foreclosure, you can typically remedy that situation.

Lesson #4 – Fix contracts and financing, not homes

Who makes more money from a property, the bank or the landlord? The truth is that the bank owns the property and the landlord owns all the liability. Wealth only comes when you own contracts and financing that work in your favor.

Lesson #5 – Don’t manage tenants

If you manage tenants, you can’t get wealthy. Show me a landlord and I’ll show you someone working very hard for measly returns. Selling your equity under creative financing pays about the same as being a landlord but requires a lot less management.

Lesson #6 – Have multiple resale options

I was so excited to buy my first property but I realized I didn’t have much of an end plan figured out. Every successful business knows exactly how they’re going to move their product or service and every real estate investor should too.

Lesson #7 – Location doesn’t matter

If you pay full market value and you’re renting for the long term, location is the most important consideration. If you’re buying with significant equity, the local market is almost irrelevant. Since you’re in each property to make money, with the right purchase price, even the “ghetto” can make sense. A heavily discounted slum property is better than a full price nice area. Buy great deals, not great markets.

Lesson #8 – Get the right advice

When I first started, I took everyone’s real estate advice. I had a revelation though. If stock brokers knew how to invest, they’d already be rich investors. If the people giving me advice knew how to make money through real estate investing, they’d be using it. Your local real estate investment club has loads of valuable advice that can be attained for free from investors who are actually successfully doing what you want to know.

Lesson #9 – Analysis

Over 90% of “investors” buy their rental properties because it’s a nice place in a nice area somewhere near where they can drive to. You don’t buy stocks because you can drive to the company and see it. You buy them to turn a profit. Real estate is a business. Analyze the cash flow position and resale options of every property in detail.

Lesson #10 – Marketing

Every business is 90% marketing. If you want to generate consistent profits and actually work less, you absolutely must focus the bulk of your efforts on marketing. You’ll bring deals to you instead of seeking them out. Every successful business knows that marketing is the key to their business.

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Matthew David

"The Investor Today"